In the Eyes of the Government What is a “Small Business”?

Small Business Man

It’s when a disgruntled employee and an investor love each other very much and… that’s how it starts, right?



Last Thursday House Republicans passed a bill that made it easier to let small businesses get new equipment and property through a reinstated tax break that had expired in the beginning of this year. This of course surprised absolutely no one. Much like birds migrating south during the winter, during the legislative session, Republicans will always push for tax breaks for small businesses. In fact it isn’t just Republicans, how many times have you ever heard of any politician criticizing small businesses? Doing so would be just below the level of head-butting a baby on the campaign trail on the “how to not get reelected” scale. Yet the question I keep coming back to is this.


What the hell constitutes a small business in America?


I mean seriously, all politicians – both Democrats and Republicans – always say in their stump speeches that they support small businesses, but do our perceptions of a small business match up with the “official” definition?


According to the US Small Business Administration (SBA), the definition of a small business changes depending on the industry that it represents. SBA’s small business standards range anywhere from 500 employees (hydroelectric power companies) to 1,000 employees (manufacturing). In the SBA’s eyes, small businesses are like snowflakes, each uniquely beautiful in their own special way. This would be all well and good if it weren’t for the fact that the federal government gives out loans, government contracts, and other assistance in hopes of leveling the playing field between small businesses and larger corporations.


Steve Cooper, a contributor for Forbes, asked a similar question two years ago and used the Huffington Post to make a point. Before AOL bought the Huffington Post, under the SBA’s rules, they would have qualified as being a small business. At the time the Huffington Post had 1,000 employees under their belt. Under SBA’s standards there are around 28 million small businesses currently in the US which make up 99.7 percent of U.S. employer firms!


The face of small business.

The face of small business.


If you think that number is staggering, you’re not alone. Because to the general populace, we tend picture a small businesses being mom n’ pop general store that knows you on a first name basis, not some nuclear power plant in Middle-America that employs 750 people. Others have said the solution to this problem is to not define small businesses based on the size of the company, but the company’s net worth.


But this can also get tricky.


Take the tech industry. Right now in Silicon Valley there are hundreds of start-up firms currently in the area with employees numbering around the teens. Yet if you were to look at the capitol going through these companies, it sometimes goes into the hundreds of millions. Would you call Instagram, who had millions in capitol before getting bought by Facebook for $1 billion, a small business? Constituting these companies as small businesses would be going against the spirit of the classification, considering federal assistance is provided based on the fact that small businesses have a harder time accruing resources.


As you can see the word small business takes many connotations in the US. The only thing that anyone can agree about small businesses is that they love them.


Whatever “them” is anyway.


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